Jørgen Vig Knudstorp, President and CEO, LEGO Group
Immediate Issue/Problem Being Faced:
How can Jørgen Vig Knudstorp reinvent innovation and sustain it?
Basic Issues:
1.Increasing competition in the toy market and the consolidation of smaller stores into large Wal-Mart sized retailers. 2.An increase in the online and video gaming market meant less of a focus on traditional toys. Innovation is necessary. 3.Patent and trademark expirations leading to easier entrance requirements for Lego knockoffs. 4.Lack of innovation and convoluted innovation processes and procedures. 5.Keeping the product relevant. Star Wars brands are great during a time when new movies are coming out and they can utilize the marketing done for the movies, but when the movie is 5 years old the only customers purchasing are Star Wars enthusiasts. 6. Once a product is in the innovation process, it should not be halted and given up on before it is thoroughly explored. 7. Designers fear that too many components have been scrapped, thus limiting their creativity which inevitable may affect revenue.
Urgency/Importance:
Jorgen must take lego from a sustainable phase to a profitable one through product innovation. The urgency is not specifically a time issue; it is that of revenue-generating issue. There appears to be no immediate timeline, other than in the amount of years as the phases are broken down. Phase 1 is complete, phase 2 is scheduled for 2006/2007 and phase 3 is scheduled to be completed in 2008/2009
Decision Criteria:
-The alternative must be one that can be sustained with minimal overhead as the -company just got out of debt. -It must utilize its devoted customer base as well as allow for growth in their market share. -It must create a framework for innovation that does not become a convoluted process. - Competition is only increasing with the amount of technology available – technology takes four years off of a child’s regular ‘interest’ in a product like Lego. - Knudstrop and his team must ensure that if they decide to license the Lego brands to external partners, they need to be able to have the product readily available and on the shelves when the licensor releases their associated products. - Lego needs to put greater priority into projects such as the Lego Development Process (LDP) and streamline it to be more efficient to be able to get the products to market in a timely fashion (current time to market is 36 months). - If Lego continues to not have a concrete vision, they will continue to lose confidence and they will not have the power to retain their already waning identity.
Alternatives:
1. Internal Development team should collaborate with outside inventors 2. Create an effective, efficient committee to approve or deny potential innovations 3. Open the new market of the age between 12 to 25 who are young and like to the stuff relate to the new things like movie and game. Creat the new toy or chess and card relate new topic. For example the World of Warcraft and Transformers which are really cool. 4. Creat the series toys for collection. Finding some classics movies to build the roles in the movie.
Missing Information:
-the case does not give any information on customer demographics: age, sex, geographical location… -the case does not tell us what age group provides the most profitability
Assessment of Alternatives:
1.Pro:
Good for the team work
Increase the efficiency of operation
Avoid the waste of money and time
Con:
Does't make sure it will help company walk out this situation.
Need extra time to explain or inquire to the inventors.
The team cannot be creative because of the limit of inventor who only focus on the profit.
2.Pro:
Help team to find the direction of innovation
Reduce the cost of wrong innovation
Increase the power in the item of innovation.
Con:
The wrong judgement will happen sometime
More personal ideas will influence the result of judgement
Negative thoughts will be there when the idea was deny.
3. Pro:
The consumer will be large means the needs also bigger.
New market will bring the ideas and change of innovation
Just build the toys and chess based on the population games will be easy task for the team.
This also will help the company stand the wave of fasion.
This is an value innovation which think about more about the customers and increase the confidence to company
Con:
The copyright fee will be large.
Increase the amount of competitors and the price should be low.
The risk of come to nothing because the people in this age will focus on the details which means more meticulous work.
4. Pro:
Easy to find based on the market research
The collection will be a popolation and bring big profit because people will buy all the roles.
More dult will buy them for souvenir their memory and they won't care about the price as long as it not too ridiculouse.
Con:
There must be store some toys who do not like or need.
Different people have defferent taste and the qualtity is not easy to control.
It will be a long-term work because not everyone can afford a group role in short time
Selection of Preferred Alternative:
I believe that Lego needs to concentrate its efforts on two main markets. First, I think it needs to continue its presence in the 3-8 age group and provide toys that stick to the basic Lego fundamentals. It must be incredibly easy to use and there may be an opportunity to also license these toys to movie makers to increase sales during the release of kids movies.
The second market that I think will provide the most growth is the older market. Maybe 8-40 years old. Lego must utilize its loyal and competitive customer base through facilitating international competitions with cash prizes. Lego may hold this competition annually and use it to not only market the new online products but to also market new products through the competition and release it for sales online only. This would generate more traffic to the website and allow for components that are more complex to be utilized by the creative end users of the Lego product. On top of these areas of focus, I would also create a design competition for users world wide again offering cash prizes. Who better than to incubate innovation than the millions of users worldwide? This would also be free as you would only be paying the winners of the competition. Lego would not only stand to reduce costs internally, but have the privilege of tapping into a much larger innovation market.
Assumptions:
The largest assumption in this alternative, is that the 8-40 year old market currently exists and in large numbers. We also assume that the current competitions are large and have room for growth.
Action/Implementation Plan:
We recommendate to choose the alternative 3 which is open a market related to the new thing like moives and games.
1. In the short time (1-3 month), Lego creates the innovation team and makes the department managers to be the committee advisory to monitor the process of the innovation. During this time, the innovation team needs to set up the detail schedule for the innovation.
2. The marketing manager will pay attention to the fasion of society and make surveys to know the satisfaction and needs of customers. And the communication is a big issue for Lego. They need to talk more with customers and know well. 3. The design of the toys should follow the fasion of society and update in time. 4. When the new toys released, Lego can make some free gift to the customers in order to attract more customers. 5. When selling the new fasion toys, the tradional Lego toys, such as star wars, also should produce and sell, and this is the parallel strategy in case of the failure of new fasion toys.
Case Analysis Template
Reading:
INNOVATION AT THE LEGO GROUP (A)Who:
Jørgen Vig Knudstorp, President and CEO, LEGO GroupImmediate Issue/Problem Being Faced:
How can Jørgen Vig Knudstorp reinvent innovation and sustain it?Basic Issues:
1.Increasing competition in the toy market and the consolidation of smaller stores into large Wal-Mart sized retailers.2.An increase in the online and video gaming market meant less of a focus on traditional toys. Innovation is necessary.
3.Patent and trademark expirations leading to easier entrance requirements for Lego knockoffs.
4.Lack of innovation and convoluted innovation processes and procedures.
5.Keeping the product relevant. Star Wars brands are great during a time when new movies are coming out and they can utilize the marketing done for the movies, but when the movie is 5 years old the only customers purchasing are Star Wars enthusiasts.
6. Once a product is in the innovation process, it should not be halted and given up on before it is thoroughly explored.
7. Designers fear that too many components have been scrapped, thus limiting their creativity which inevitable may affect revenue.
Urgency/Importance:
Jorgen must take lego from a sustainable phase to a profitable one through product innovation.The urgency is not specifically a time issue; it is that of revenue-generating issue. There appears to be no immediate timeline, other than in the amount of years as the phases are broken down. Phase 1 is complete, phase 2 is scheduled for 2006/2007 and phase 3 is scheduled to be completed in 2008/2009
Decision Criteria:
-The alternative must be one that can be sustained with minimal overhead as the -company just got out of debt.-It must utilize its devoted customer base as well as allow for growth in their market share.
-It must create a framework for innovation that does not become a convoluted process.
- Competition is only increasing with the amount of technology available – technology takes four years off of a child’s regular ‘interest’ in a product like Lego.
- Knudstrop and his team must ensure that if they decide to license the Lego brands to external partners, they need to be able to have the product readily available and on the shelves when the licensor releases their associated products.
- Lego needs to put greater priority into projects such as the Lego Development Process (LDP) and streamline it to be more efficient to be able to get the products to market in a timely fashion (current time to market is 36 months).
- If Lego continues to not have a concrete vision, they will continue to lose confidence and they will not have the power to retain their already waning identity.
Alternatives:
1. Internal Development team should collaborate with outside inventors2. Create an effective, efficient committee to approve or deny potential innovations
3. Open the new market of the age between 12 to 25 who are young and like to the stuff relate to the new things like movie and game. Creat the new toy or chess and card relate new topic. For example the World of Warcraft and Transformers which are really cool.
4. Creat the series toys for collection. Finding some classics movies to build the roles in the movie.
Missing Information:
-the case does not give any information on customer demographics: age, sex, geographical location…-the case does not tell us what age group provides the most profitability
Assessment of Alternatives:
1.Pro:
Good for the team work
Con:
2.Pro:
- Help team to find the direction of innovation
- Reduce the cost of wrong innovation
- Increase the power in the item of innovation.
Con:- The wrong judgement will happen sometime
- More personal ideas will influence the result of judgement
- Negative thoughts will be there when the idea was deny.
3. Pro:- The consumer will be large means the needs also bigger.
- New market will bring the ideas and change of innovation
- Just build the toys and chess based on the population games will be easy task for the team.
- This also will help the company stand the wave of fasion.
- This is an value innovation which think about more about the customers and increase the confidence to company
Con:- The copyright fee will be large.
- Increase the amount of competitors and the price should be low.
- The risk of come to nothing because the people in this age will focus on the details which means more meticulous work.
4. Pro:- Easy to find based on the market research
- The collection will be a popolation and bring big profit because people will buy all the roles.
- More dult will buy them for souvenir their memory and they won't care about the price as long as it not too ridiculouse.
Con:Selection of Preferred Alternative:
I believe that Lego needs to concentrate its efforts on two main markets. First, I think it needs to continue its presence in the 3-8 age group and provide toys that stick to the basic Lego fundamentals. It must be incredibly easy to use and there may be an opportunity to also license these toys to movie makers to increase sales during the release of kids movies.
The second market that I think will provide the most growth is the older market. Maybe 8-40 years old. Lego must utilize its loyal and competitive customer base through facilitating international competitions with cash prizes. Lego may hold this competition annually and use it to not only market the new online products but to also market new products through the competition and release it for sales online only. This would generate more traffic to the website and allow for components that are more complex to be utilized by the creative end users of the Lego product.On top of these areas of focus, I would also create a design competition for users world wide again offering cash prizes. Who better than to incubate innovation than the millions of users worldwide? This would also be free as you would only be paying the winners of the competition. Lego would not only stand to reduce costs internally, but have the privilege of tapping into a much larger innovation market.
Assumptions:
The largest assumption in this alternative, is that the 8-40 year old market currently exists and in large numbers. We also assume that the current competitions are large and have room for growth.Action/Implementation Plan:
We recommendate to choose the alternative 3 which is open a market related to the new thing like moives and games.
1. In the short time (1-3 month), Lego creates the innovation team and makes the department managers to be the committee advisory to monitor the process of the innovation. During this time, the innovation team needs to set up the detail schedule for the innovation.
2. The marketing manager will pay attention to the fasion of society and make surveys to know the satisfaction and needs of customers. And the communication is a big issue for Lego. They need to talk more with customers and know well.
3. The design of the toys should follow the fasion of society and update in time.
4. When the new toys released, Lego can make some free gift to the customers in order to attract more customers.
5. When selling the new fasion toys, the tradional Lego toys, such as star wars, also should produce and sell, and this is the parallel strategy in case of the failure of new fasion toys.